Correlation Between Northern Star and BHP

Can any of the company-specific risk be diversified away by investing in both Northern Star and BHP at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Northern Star and BHP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northern Star Resources and BHP Group, you can compare the effects of market volatilities on Northern Star and BHP and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Northern Star with a short position of BHP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and BHP.

Diversification Opportunities for Northern Star and BHP

-0.56

Correlation Coefficient

Northern Star  BHP

Excellent diversification

The 3 months correlation between Northern and BHP is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group and Northern Star is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Northern Star Resources are associated (or correlated) with BHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group has no effect on the direction of Northern Star i.e., Northern Star and BHP go up and down completely randomly.

Pair Corralation between Northern Star and BHP

Assuming the 90 days trading horizon Northern Star Resources is expected to under-perform the BHP. In addition to that, Northern Star is 1.72 times more volatile than BHP Group. It trades about -0.13 of its total potential returns per unit of risk. BHP Group is currently generating about 0.12 per unit of volatility. If you would invest  3,766  in BHP Group on April 25, 2025 and sell it today you would earn a total of  419.00  from holding BHP Group or generate 11.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Northern Star Resources  vs.  BHP Group

Northern Star Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Star Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BHP Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BHP may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Northern Star and BHP

The main advantage of trading using opposite Northern Star and BHP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, BHP can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BHP will offset losses from the drop in BHP's long position.

The idea behind Northern Star Resources and BHP Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.